How to Survive the Retail Apocalypse
It’s no secret that retailers are afraid of being swept away by the ongoing retail apocalypse — and with good reason. This year, more than 12,000 stores are expected to close, while 50 percent of the 1,200 shopping malls across the U.S. will close by 2023. While online stores fare better, many boutique digital shops are also threatened by the ongoing Amazon.com juggernaut.
The Amazon growth narrative refuses to slow down. Last quarter, Amazon's online sales grew by nearly 25 percent, while the company's new brick-and-mortar venture, Amazon Go, is already showing signs of real promise. Amazon Go is a new kind of store with no checkout required, and is powered by the world’s most advanced shopping technology. Customers never have to wait in line and can pay with their online Amazon account.
With Amazon Go, Amazon has reinvented the traditional retail store, integrating its digital technology to deliver the same level of convenience offline that shoppers enjoy online. At the Amazon Go store in downtown Seattle, shoppers check into the store with their smartphones using the “Amazon Go” app at a turnstile, pick up the items they want — while being watched and scanned by artificial intelligence technology — and then pay by simply leaving.
As Amazon incurs upon the brick-and-mortar shopping experience, how can retailers — from grocery to big-box to specialty retail and more — galvanize to fight back and save their businesses?
First, they should take a page out of Amazon's playbook and use their brick-and-mortar presence as a more deeply integrated part of a wider omnichannel strategy, making the offline shopping experience as easy and frictionless as the online one. Every time a consumer purchases goods from Amazon, the retailer makes it easier to buy from it again while also offering related products that the consumer would most likely want. Every transaction begets one or more incremental transactions.
While some retailers have adopted a few signature Amazon tactics — e.g., queue-less checkouts and home delivery — the majority are still woefully behind in other key shopping technology innovations. At the top of that list is personalized loyalty engagement and using data to build unique individual customer profiles that help drive repeat purchases.
For example, the average grocery store will offer product promotions to consumers via manufacturers’ coupons, whether they're relevant to the individual consumer or not. In contrast, Amazon sends personalized offers, recommendations and recipes to each individual consumer that are highly relevant and appropriate. In this scenario, if Amazon sees a customer buying two dozen oranges per week at Amazon Grocery, it immediately offers a product recommendation for a juicer, which is both incremental and appropriate as well as valuable to the shopper. The less data-adroit retailer might offer a discount on Twinkies. Offers often don’t follow from existing behavior.
Drive Personalized Loyalty On Par With Amazon
Retailers need to get their vast data houses in order to drive personalized loyalty on par with Amazon. They must build individual unique profiles for each of their customers, not just aggregate sales data by category or SKU. These unique profiles are easy to build with the right cloud-based enterprise marketing technology. Once you build these 360-degree view profiles, you must embrace mobile more fully. Consumers are increasingly relying on mobile to find and shop for products as well as uncover the best deals and offers as location-based data lures them into nearby brick-and-mortar stores.
Retailers that can calculate lifetime value looking backward and lifetime potential moving forward, as well as incent and reward their customers with compelling and relevant personalized offers, will survive the retail apocalypse. For example, at SessionM, we work with a large omnichannel retailer that saw an 86 percent increase in basket size by leveraging a personalized loyalty engagement strategy during the holiday season vs. anonymous customer transactions.
While embracing personalized loyalty, retailers should also consider these additional strategies:
Become a Destination
Retailers that want to succeed must become an entertaining destination — an actual experience — rather than just a store. For example, The Children’s Place is a thriving kids brick-and-mortar clothing store that's also a fun place for kids to shop with their parents. By the same token, Best Buy has recreated itself as a destination for “ask for help” advice with home and electronics needs, which is important in this age of smart houses and do-it-yourself remodeling. Best Buy has benefitted from employing a team of experts who help customers understand, evaluate and install the latest and greatest new smart products. In contrast, Amazon can’t fully help a shopper understand how to use the new features on their latest smart oven, so this gives traditional retailers a leg up when they need it the most.
Sell Products That Amazon Doesn’t
Dollar General is another retailer that's succeeding with its thousands of stores around the country. The dollar store chain sells inexpensive merchandise that Amazon can’t sell because it wouldn't make money on the items due to the shipping costs. Costco is another retailer that succeeds because shoppers can buy in bulk at ultra-low prices. Lastly, Home Depot sells products that are too big or cumbersome for Amazon to ship.
Improve Customer Service
Importantly, Home Depot sells know-how and a mix of product and people that Amazon isn't yet fully able to combat. Similarly, CVS now offers insurance and clinics that diagnose ailments and process insurance paperwork as prescriptions get filled.
Balance Online and Offline Channels
Warby Parker is a great example of a retailer that has perfected the balance between its retail channels. It started as an online-only provider of prescription eyeglasses. Today, it has perfected the brick-and-mortar store experience and now operates nearly 50 stores that enable shoppers to try on frames in person. Renowned for exceptional customer service with well-trained and highly knowledgeable sales associates, Warby Parker planned to open 25 new stores last year at a time when many retailers were closing shops.
In the end, there's no one single right way to combat Amazon because it's not following a singular strategy. Amazon's approach is multifaceted, and multichannel retailers must respond accordingly if they wish to compete and thrive in this new age of the empowered consumer. In the end, it will be difficult to “out-Amazon Amazon” when it comes to leveraging data. However, retailers must get their arms around their customer data if they expect their customers to put their arms around them moving forward. If not, the retail apocalypse will come for them too, sooner than they think.
Patrick Reynolds is the chief marketing officer of SessionM, a cloud-based software-as-a-service platform for customer engagement and marketing.